Australian dollar and stocks dive as coronavirus concerns mount
It was a sea of red in the global stock market as traders started to price-in risks brought by coronavirus (COVID-19). In the United States, futures tied to the Dow and Nasdaq dropped by 220 and 70 points respectively. In Europe, the DAX and CAC indices declined by 250 and 80 points respectively. The world’s stock market has lost more than $2 trillion this week alone. Today, we heard from a number of companies like Diageo and Danone, which warned about impacts of the disease. All this happened as the illness continued to spread in Japan, South Korea, Iran, Kuwait, and Italy. Also, the CDC warned the US to prepare for the disease. It told companies to prepare for remote working. It also warned patients to start embracing telemedicine.
The Australian dollar and stocks dropped significantly today as fears of the virus rose. The Aussie dropped to the lowest level since 2009 while the ASX index declined by more than 2% today. This is mostly because Australia is one of the main countries with significant exposure to China. The country exports two-thirds of its goods to China. The impacts of the disease are already being seen in the country. Data from the bureau of statistics showed that construction work done in the fourth quarter declined by 3%. This trend of weakness is expected to continue as parts of China remain in lockdown.
The S&P500 futures declined today as the market focused on COVID-19. This is not the only reason. Investors are also paying close attention to the political situation in the United States. Bernie Sanders, the Democratic socialist, has continued to rise in polls. He has also won all of the primaries seats so far and is in a strong position ahead of Super Tuesday. Bernie is a risk because of his policies towards companies. For example, he has said that he will increase taxes on companies and wealthy individuals. He has also called for the banning of fracking and for increasing the minimum wage to $15. All this is negative to corporations.
The S&P500 index has been on an upward trajectory this year. It reached a record high of $3297 just a week ago. Today, the S&P500 futures reached a low of $3088.5, which is the lowest level since January 3. The price is along the lower line of the Bollinger Bands on the daily chart. It is also above the 61.8% Fibonacci Retracement level and below the short and medium-term moving averages. The RSI has dropped to the oversold level while the Bears Power has continued to drop. The momentum may continue to decline today as investors rush to safety.
The XBR/USD pair dropped further today as traders continued to worry about COVID-19. The pair reached an intraday low of 53.12. This is the lowest level since February 10. It is also along the important support shown in yellow below. It is also below the short and longer-term exponential moving averages while the RSI has dropped to the oversold zone. It is also along the lower line of the Bollinger Bands. The pair may move below the important level of 53.00.
The GBP/USD pair declined to an intraday low of 1.2922. This price is along the 38.2% Fibonacci Retracement level on the hourly chart. The price is above the 14-day and 28-day EMA while the RSI has moved to the oversold level of 30. The Bears Power has been declining too. The pair may continue moving lower as Brexit and COVID-19 risks increase.